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Reining in the Administrative State

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Reining in the Administrative State

Seila Law gently pulls the Supreme Court back toward constitutional design. July 2, 2020
Politics and law

Among the decisions issued by the Supreme Court on Monday, June 29, the headline case is June Medical Services LLC v. Russo—maintaining, for now, the Court’s abortion-rights jurisprudence. But Court watchers should also pay attention to another major decision rendered that day, Seila Law LLC v. Consumer Financial Protection Bureau, which has significant implications for the federal administrative state. As in other recent decisions, the Court in Seila Law has outlined limits on the bureaucracy’s encroachment on our constitutional structure.

The Seila Law case involved the Consumer Financial Protection Bureau (CFPB), an agency created by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. Dodd-Frank was enacted by a nearly party-line vote in the wake of the 2008 financial crisis. The new agency was the brainchild of then–Harvard Law professor Elizabeth Warren, whom the Obama administration had tapped as its initial director before the Senate balked. The CFPB was granted sweeping rulemaking powers—including the authority to craft regulations under 19 separate statutes—as well as substantial enforcement and adjudicatory authority.

The Dodd-Frank law sought to insulate the new agency from control by elected political actors, including Congress and the president. Congress could not cut the CFPB’s budget. And the agency director would serve a five-year term—beyond that of a single presidential term—and could not be fired by the president. This latter provision lay at the crux of the dispute. The Court ruled that, for the agency to pass muster under our constitutional design, the provision limiting the president’s ability to fire the CFPB director had to go.

In his opinion, Chief Justice John Roberts noted that the Court had carved out exceptions to its long-held general rule that the president has the power to remove executive branch officials—namely, in multimember bipartisan commissions with broad rulemaking and adjudicatory powers, the “alphabet soup” of so-called independent agencies, such as the FTC, SEC, and FCC. The Court had also made exceptions for “inferior officers” with “limited jurisdictions,” under certain conditions.

But the CFPB went a step further. Its director could certainly not be deemed an inferior officer. Its agency powers were vast. And, rather than a multimember bipartisan commission—with terms staggered to ensure continuity—its powers were solely concentrated in the single person, unaccountable to any elected official. In ruling on the case, the Court didn’t overturn its prior decisions (though Justices Clarence Thomas and Neil Gorsuch would have done so). But it did say: “Enough.”

The Constitution doesn’t expressly say that presidents can remove executive-branch officers. Article II of the Constitution begins simply, “The executive Power shall be vested in a President of the United States of America.” Early in the history of the America republic, leaders disagreed about what this meant. In the first session of Congress, the Constitution’s principal drafter, James Madison, argued that the vesting of executive power with the president required that the president be able to remove officers as a “species of power which is necessary to accomplish that end.” Congress agreed. It acknowledged the president’s constitutional removal power in the “Decision of 1789,” rejecting an effort to require the president to obtain Senate approval to remove unelected officers—essentially importing the Senate’s power over officers’ appointment. The Supreme Court subsequently deemed that congressional decision dispositive on the question.

In early American history, presidents guarded this power zealously. George Washington maintained that the president retained full authority over executive-branch departments—else “perplexity and confusion will inevitably ensue.” Washington’s successor, John Adams, argued that “a divided executive” was the “worst evil that can happen in any government . . . and incompatible with liberty.” When the Democratic-Republicans won control from the Federalists, President Thomas Jefferson reaffirmed the principle that there should be a “unity of object and action” in the executive branch.

In the 1830s, Congress fought with Andrew Jackson over the Second Bank of the United States and passed a law authorizing only the Treasury secretary, not the president, to pull federal funds from the bank. Jackson bristled—“the entire executive power is vested in the President of the United States,” he insisted—and promptly sacked his Treasury secretary, filling the slot with a recess appointment to get his way. A new fight over the president’s power to remove officials emerged after the Civil War, when Radical Republicans in Congress tussled with President Andrew Johnson over postwar Reconstruction policy. Congress passed the Tenure of Office Act, requiring Senate approval for executive-branch firings. Johnson refused to honor the law, prompting the nation’s first presidential impeachment.

Almost 60 years after the fact, in 1926, the Supreme Court opined that the Tenure of Office Act had been unconstitutional. In the decision in that case, Myers v. United States, Chief Justice William Howard Taft—himself a former president—wrote for the Court majority. Then–U.S. President Woodrow Wilson had dismissed Frank S. Myers from his position as a first-class postmaster in Portland, Oregon. A statute required Senate approval before a president could dismiss federal postmasters. The Court declared the statute unconstitutional, opining that the president’s power to remove executive officers “is an incident of the power to appoint them, and is in its nature an executive power.”

But the president’s power over the executive branch he headed would soon be cabined. Just nine years after Myers, the Supreme Court carved out an exception when it denied President Franklin Roosevelt’s asserted power to remove from the Federal Trade Commission a commissioner appointed by his predecessor. In Humphrey’s Executor v. United States—litigated on behalf of the late commissioner William Humphrey’s estate, for back pay—the Court upheld Congress’s statutory requirement that a president could only remove an FTC commissioner “for inefficiency, neglect of duty, or malfeasance in office.” Immediately after presenting the constitutional questions at issue, the Court pointed to the commission’s structure: a bipartisan board of five commissioners with staggered terms. The Court emphasized that the FTC’s “duties are neither political nor executive, but predominantly quasi-judicial and quasi-legislative.”

In 1988, the Supreme Court reaffirmed its Humphrey’s Executor holding, and extended the exception to the general rule, in Morrison v. Olson. Morrison involved a dispute between the Reagan Justice Department and the Democrat-controlled House of Representatives over administration of the federal Superfund environmental cleanup program. The chairman of the House Judiciary Committee called for the appointment of an independent counsel to investigate, using the same statute that later empowered Ken Starr to investigate Bill Clinton’s Arkansas Whitewater affair, and subsequently his affair with White House intern Monica Lewinsky. The White House refused to cooperate; its Office of Legal Counsel argued that the independent counsel office provided for in the law was improperly insulated from presidential control.

The Court disagreed. In an opinion by Chief Justice William Rehnquist, the Court emphasized that “the independent counsel is an inferior officer under the Appointments Clause” of the Constitution—not a “principal officer”—and that the position had “limited jurisdiction” and was “lacking [in] policymaking or significant administrative authority.” The Court also emphasized the special situation Congress was facing: “the conflicts of interest that could arise in situations when the Executive Branch is called upon to investigate its own high-ranking officers.”

Justice Antonin Scalia wasn’t persuaded, and he fleshed out the rationale for presidential control over the executive branch in an unsparing dissent, which he came to regard as his greatest: “A government of laws means a government of rules. Today’s decision on the basic issue of fragmentation of executive power is ungoverned by rule, and hence ungoverned by law. . . . This is not analysis; it is ad hoc judgment.” In 2015, at an event at Stanford, Justice Elena Kagan called Scalia’s dissent “one of the greatest dissents ever written.”

That didn’t mean she agreed. As a 41-year-old law professor at Harvard in 2001, Kagan had fleshed out a broader role for Congress in limiting presidential power to remove executive-branch appointees. In a law-review article, “Presidential Administration,” Kagan derisively characterized the Scalia view of presidential removal powers as “unitarian.” Justice Kagan cited that law-review article liberally in her own dissenting opinion Monday, authored on behalf of the “Ginsburg Four,” the “progressive” Democrat-appointed justices who invariably side together in front-page high-court decisions. (The four progressives unsurprisingly voted together in Monday’s June Medical Services case, too.)

Like many a modern dissent, Justice Kagan’s opinion in Seila Law seems crafted for media consumption. It’s witty; like Justice Scalia, Justice Kagan is one of the great writers in the history of the Court. Its “fiery” argument is already garnering praise from defenders of the administrative state. But it’s ultimately lacking.

Justice Kagan’s dissent on behalf of the Ginsburg bloc couches the removal of bureaucracy from future democratic oversight as somehow pro-democratic: she laments the prospect of “five unelected judges rejecting the result” of the congressional decision that led to the creation of the CFPB. (No such deference was presumably due to the legislature in Louisiana that passed the abortion regulation at issue in June Medical.) The dissent peddles falsehoods: she shamelessly declares that at the time Dodd-Frank was passed, “No one had a doubt that the new agency should be independent.” (Hogwash.) It stretches credulity: she pooh-poohs concerns that a single unaccountable director might be both more aggressive than a multimember board and peculiarly untethered from the elected head of the executive branch. (A claim that no one with a basic knowledge of the screwball-comedy conflict between Obama-appointed CFPB head Richard Cordray and President Trump could possibly believe.)

And in places, Justice Kagan is in serious tension with herself. She emphasizes that the CFPB was enacted at a “moment of economic ruin . . . to address the causes of the collapse and prevent a recurrence.” (Left unsaid is how limits on small-dollar credit-card and consumer-banking practices relate to asset-backed securities, credit-default swap markets, and finance-industry balance sheets.) But she simultaneously argues the logical converse: by comparison with other federal structures like the Federal Reserve, the CFPB “is a piker.”

For all its rhetorical punch, Justice Kagan’s Seila Law dissent elides the obvious. The Supreme Court has signed off on independent agencies governed by necessarily fractured bipartisan boards (perhaps regrettably). And it has signed off on idiosyncratic, unremovable “inferior officers” like the independent counsel (perhaps regrettably). But it has never before signed off on something quite like this.

So the Court said, “no further.” For those of us who don’t believe that the answer to our difficult political questions is to enable one congressional majority to tie the hands of future Congresses and presidents and punt hard regulatory questions to unelected, unaccountable government bureaucrats, there’s a simple reply to the ruling: Thanks.

Photo: YayaErnst/iStock

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